Boosting FDI inflows: bet on India and China

Investments are the fuel that drives economic growth across the globe. And the fuel will flow from China, India and other Asian economies in the next decade; not Europe or the United States of America.
In 2012, flows of Foreign Direct Investment (FDI) to developing economies surpassed flows to the developed world, for the first time in history. Global FDI dropped to $1.3 trillion in 2012. Of the $300 billion drop over the previous year, 90 percent of the decline was witnessed in developing economies like Germany, Belgium and Japan.
But the developing economies are not just a sponge for global investment flows. Asian conglomerates are leading the charge on cross-border mergers and acquisitions.
In the outgoing year, Petronas from Malaysia put up $5.4 billion for Canada-based Progress Energy Resources Corporation; the Chinese Sinopec Group took over Brazils Petrogal Brasil for $4.8 billion. The global energy Goliath, China Three Gorges Corporation acquired Energias de Portugal for $3.5 billion.
In Pakistan, the fixation for attracting FDI inflows has historically nested on Europe, the US and the Middle East. But the declining global trend of investment flows from these economies calls for a major policy shift. China, India, Malaysia and some other Asian countries are the economies where investors are hungry for new markets and opportunities.
That will require a study of the investment flows from these economies. A study commissioned by the Indian Institute of Management-Ahmedabad in 2010 concluded that outward FDI from India has predominantly taken the form of acquisitions of companies in other countries, over the past 10 years.
On the other hand, Chinese investors have largely favoured Greenfield investments, predominantly in mining and other sectors acquisitions as a means for rolling out investments overseas, although Chinese giants are increasingly supplementing this approach with acquisitions abroad.
Increased focus within the region as a source for trade and investments is not only a mantra for bringing peace and stability to the region; it is the only way forward. The Global Investment Trends Monitor, issued by the United Nations Conference on Trade and Development (UNCTAD) has warned that growth in global FDI flows will remain hesitant until 2015.
Projecting growth of just $300 billion between now and 2015, the Report warns the sluggishness in FDI flows will be more pronounced than projected earlier and that investments emanating from developed economies will remain fleeting.
If Pakistans record for attracting FDI is to improve from its abysmal performance over the past five years, policy makers and private sector alike would be well-advised to focus efforts at attracting the attention of investors and conglomerates of the Orient and the Sub-continent.